The market for non-US companies raising capital in depositary receipt (DR) form remained strong in 2013, with USD10.5bn in DR capital raised.
According to an industry report from Citi, initial public offerings in DR form drove issuance, representing USD5.6bn – or 54 per cent – of the total, as IPOs rebounded during the fourth quarter of 2013.
In 2013, follow-on offerings in DR form represented approximately USD4.9bn – or 46 per cent – of the total, up 135 per cent compared to 2012. The EMEA region was at the forefront of overall capital raising with 17 issuers raising approximately USD4.6bn. The biggest year-over-year increase came from the Asia Pacific region which had 25 issuers raise USD4.4bn, up 164 per cent compared to 2012.
“The dramatic increase in follow-on offerings shows that there is healthy investor demand for equity issued by non-US companies,” said Nancy Lissemore, managing director, global head of depositary receipt services, Citi. “Due to a combination of Citi’s global reach, local expertise, an industry-leading distribution network, and specialised investor relations support, Citi as Depositary was able to obtain a dominant market share in follow-on offerings in DR form and 33 per cent market share in total capital raised in DR form.”
Transactions from Russia (USD2.6bn), Taiwan (USD2.1bn) and China (USD1.4bn) combined for 58 per cent of total capital raised.
The top two DR capital raisings overall came from issuers in the financial sector: TCS Group Holdings (USD1.1bn) based in Russia, and Fubon Financial (USUSD0.9bn), based in Taiwan.
The financial, communications and industrial sectors together accounted for approximately 59 per cent of the total capital raised.
International sentiment toward non-US equities improved in 2013, with the Citi Liquid Depositary Receipt World ex-US Index, which acts as gauge of international investor sentiment towards non-US markets, gaining over 11 per cent.
Investor demand remained strong, with US Investment in non-US equities as of Q3 2013 at USD5.9trn, up 16 per cent from the Q3 2012 level of USD5.1trn, according to the US Federal Reserve. Net inflows of USD752bn accounted for most of the increase, which was further supported by an increase in asset values of USD90 bn.
On a sequential basis, US investment in non-US equities in Q3 2013 was up six per cent versus the Q2 2013 level of USD5.6trn. Increasing asset values of USD218bn accounted for most of the total increase quarter-over-quarter, which was further supported by net inflows of USD109bn.
Through October, world equity funds witnessed estimated inflows of USD113.8bn. During this time, investors slowly moved back into equity funds after a year of net outflows in 2012.